SINGAPORE — US Treasury yields slipped to their lowest in three months on Monday on expectations the Federal Reserve would cut interest rates as soon as September after a weak jobs report, and as investors weighed the surprise resignation of a Fed governor.
US President Donald Trump fired a top Labor Department official on Friday after the employment market data showed weak jobs growth, while the departure of Fed Governor Adriana Kugler offered Trump the chance to reshape the Fed.
US two-year yields, which are tied to the Fed’s monetary policy, hit 3.659 percent in early trading on Monday, the lowest since May 1. Yields dropped 24 basis points (bps) on Friday, their largest daily fall in a year.
The benchmark 10-year yield was steady at 4.245 percent, hovering close to Friday’s five-week low.
Data on Friday showed that US employment growth was weaker than expected in July while the nonfarm payrolls count for the previous two months was revised down by 258,000 jobs, stoking investor concern about the integrity of economic data and the Fed’s ability to read the true state of the economy.
Investors responded by increasing the odds of the Fed resuming interest rate cuts from its next meeting in September. Traders are pricing in an 82.5 percent chance of a rate cut now, compared to 61 percent a week earlier, CME FedWatch’s tool showed.
